Quantcast
Other Stories

Recently, silver has corrected from its peak of $ 49-50 an ounce in April 2011 to the latest levels of $ 19.89 an ounce. Many believe that there is a further downside in silver. But analysts feel that the prices have ..

16 Jul 2013

NEW YORK (Commodity Online): Silver’s meteoric surge post 2008 global financial crisis was remarkable. It made the metal one of the best performing asset classes.

At times, volatility in silver surpassed that in gold. This not only attracted more trader participants but also encouraged many new investors and hedgers to start taking their positions in silver.

From its peak of around $ 19.89 an ounce in the pre-crisis era of January 2008, silver fell to hit the bottom of $ 9 an ounce in November 2008. This was the level last seen in 2006.

Recently, silver has corrected from its peak of $ 49-50 an ounce in April 2011 to the latest levels of $ 19.89 an ounce. Many believe that there is a further downside in silver. But analysts feel that the prices have already bottomed out.

According to analysts, $18-19 level should become strong long-term support as it was previous resistance twice in 2008-09 and 2010-11 respectively.

“I remain convinced that the long term prospects for precious metals are favorable and the bull market has several more years to run. At this juncture, I also believe we are witnessing an incredible short-term buying opportunity that will probably be the last of its kind. It takes a tremendous amount of courage to go against the herd, but this is where the real money is made,” writes Jason Hamlin in a latest article.

Even as the fall in silver has been nearly as steep as the 2008 decline when the entire global financial economy was at risk of collapse, yet there are no indications of any type of a (public) financial panic.

Further, after dropping much faster than silver, we are seeing signs in the past week of quality mining stocks outpacing their underlying metals. While silver is up 4.5% in the past week, many of the silver miners are up 8% or more.

Notably, silver prices have fallen below its production cost of an average of around $ 20 an ounce. This indicates that there are relatively higher chances of a rebound in the precious metal from its current levels, which is below its production cost.

At sub-20 levels, silver has created a good opportunity for buyers. The demand and supply fundamentals are supporting silver prices. Year to date sales for the popular silver eagle coin reached 25,043,500 as of July 1.

This amount is up by 44.0% from the mid year total for last year. More significantly, the year to date sales are up by 12.3% compared to the mid year sales total for 2011, when annual sales had achieved the current record high of 39,868,500. This should only accelerate in the coming months as bargain hunters load up on sub-$20 silver.

Ruling out a possibility of withdrawal of stimulus by Federal Reserve, Hamlin wrote that the FED may deliver the easing in a slightly different manner or even give it a different name, but I don’t think they can take away the punch bowl anytime soon.

Both from a fundamental and technical perspective, silver looks to be oversold at current levels. The metal was due for a correction after the overblown move towards $50 in 2011.

“I never advocate going ‘all in’ at one juncture, but I believe this is an excellent opportunity to start scaling into new positions or adding to current positions. I like to do this in tranches, buying a set amount of both physical silver and best-in-breed mining or streaming stocks every few months. This ensures that you don’t deplete all of your cash just prior to another move lower, while also allowing you to get ‘skin in the game’ at levels that appear to be near the bottom of this prolonged correction,” he said.


YOUR RESPONSE
Click on the image to reload it
Click to reload image
COMMENTS (0)

@2013 COMMODITYONLINE ALL RIGHTS RESERVED